Econ 100B-01: Intermediate Macroeconomics, Winter 2005

 

Course Description

Covers major theoretical issues arising in the study of income, employment, interest rates, and the price level. Examines the role of monetary and fiscal policy in economic stabilization. Also considers these issues as they relate to the global economy. The aim of this class is to give you the tools necessary to read critically discussions of macroeconomic issues in publications such as the Economist magazine, the Wall Street Journal and the Financial Times.

 

Prerequisites: courses 1, 2, and 11A or Applied Mathematics and Statistics 11A or Mathematics 11A or 19A.

 

Professor’s contact info

Professor:

Doireann Fitzgerald

Office:

E2 Building, Room 465

Office Hours:

Wednesdays 9.30 am – 10.30 am

E-mail:

dfitzger at ucsc.edu (please put Econ 100b in the subject line)

 

TAs’ contact info

Name:

E-mail:

Office Hours

Mark Unruh

macro100b at yahoo.com

F 15.15-16.15, Eight Acad 250

Jonie Zhou

yzhou at ucsc.edu

Tu 15.45-16.45, E2 Bldg. Rm. 403F

 

Course Schedule and location

Class:               Monday, Wednesday, Friday 11am – 12:10pm, J Bask Aud 101

 

Section:           

Day

Time

Location

TA

Monday

2pm-3:10pm

Eight Acad 250

Joni Zhou

Wednesday

8am-9:10am

Eight Acad 250

Joni Zhou

Thursday

8pm-9:10pm

Eight Acad 250

Mark Unruh

Friday

2pm-3:10pm

Eight Acad 250

Mark Unruh

 

You should have enrolled in a section when you enrolled in this class. If you have not already enrolled in a section, please do so now.

 

MSI

The MSI section leader is Joshua Wong, joshwong at ucsc.edu.

 

Section:           

Day

Time

Location

Tuesday

12pm-1:15pm

ARCenter, Rm. 202

Thursday

10am-11:15am

Oakes Learning Center

Thursday

2pm-3:15pm

ARCenter, Rm. 202

 

 

Final Exam

The final exam for this class is scheduled for Wednesday, March 16 4pm-7pm. If you know in advance that you will not be able to attend the final exam, do not enroll for this class.

 

Course requirements

Assessment will be based on class participation and section attendance (5%) problem sets (20%), two midterm exams (25% each) and the final exam (25%). There will be no make-up exams. There will also be a math quiz in the first week of class. This quiz will be based on the math prerequisites for this class. Your performance on the quiz will be a good indicator of how difficult this class will be for you.

 

Problem sets

There will be 7 problem sets. Your grade will be based on your best 6 scores of the 7. If you skip a problem set, be sure you do so for a good reason, as you will not be allowed to skip a second problem set. You are strongly advised to attempt all problem sets, as this is the best way of making sure you have learned the material covered in class.

 

Problem sets are due on Fridays. They must be submitted at the beginning of class. Homework submitted after class begins will be considered late, and will not be accepted. If for some reason you must miss class, you can submit your problem set by e-mail to your TA, or leave a hard copy in the TA’s box. It must be received by your TA before the relevant class starts.

 

Class discussions

There will be weekly class discussions, held in the last 20 minutes of class on Fridays. Each discussion is based on a reading or series of readings which can be found through links on the syllabus. Participation in the discussion will be recorded by the TAs, and will account for up to 5% of your grade.

 

Required reading

The textbook is Mankiw’s Macroeconomics, 5th Edition (Worth Publishers). This book should be in stock at the Bay Tree Bookstore. Readings assigned for particular dates are given below. The outline of the class does not follow the order in which the material is covered in the book. Additional required reading is available through links on the course webpage. Other resources that may be useful to you (such as self-grading quizzes) are made available by the publisher of the textbook at: http://bcs.worthpublishers.com/mankiw5/. A nice resource provided by the San Francisco Fed is “Ask Dr Econ” which you can find at: http://www.frbsf.org/education/activities/drecon/askecon.cfm

 

Course webpage

The course webpage is made available through WebCT. Students registered for this class should be able to log on to Econ 100B using their CruzMail username and password at: http://ic.ucsc.edu/webct

All announcements regarding this class will be made on the webpage. You are responsible for ensuring that you are up to date with all announcements. If you do not have a CruzMail account, please see me after class.

Permission codes and enrollment

This class is now full. If sufficient numbers of enrolled students drop out during the first week, permission codes for those slots will be issued in the second week of class. Students who contacted the professor during the Fall quarter will receive priority on the waiting list.

 

Frequently asked questions

How much math is used in this course?

Since 11A is a prerequisite, you are expected to be comfortable with algebraic manipulation and to know some basic calculus. Being comfortable with

taking derivatives will make your life a LOT easier. If you perform badly in the math quiz, it is a sign that you should review carefully the material

covered in 11A before the quarter progresses.

 

Do I have to go to section?

Section is compulsory. Attendance will be taken, and will count towards your grade. In section, TAs will cover new material. They will also go through the solutions to the previous problem set, and discuss any questions you have on problem sets, readings or lectures.

 

Am I responsible for material covered in section?

Yes, absolutely.

 

Can my friends and I work together on the problem sets?

Yes. The problem sets are intended to be learning experiences, so feel free to work in groups. However you may find it useful to attempt the problems on your own before working with others. Each student must submit their own problem set solutions. Remember that doing the problem sets is the best way to prepare for the exams. If you copy another student’s answers without understanding the material, your exam performance will suffer.

 

How are the problem sets graded?

The problem sets are graded on a scale of check plus, check, check minus and zero (if no problem set is handed in). Legibility is important. Typewritten problem sets are much appreciated by your TA. Where appropriate, graphs (drawn by hand) are very useful.

 

Can I turn a problem set in late?

No. Problem sets turned in after class begins are considered late, and will not be graded.

 

What if I cannot take one of the midterms?

There will be no make-up exams. You should contact your TA in advance if you cannot take a midterm.

 

What material will be covered on the midterms?

The first midterm will cover the material from the first part of the quarter. The second midterm will cover only the material from the second part of the quarter.

 

What do I do if a mistake was made in grading my midterm?

After a midterm is returned, you will have two days to contact your TA with problems or concerns.

 

What material that will be covered on the final?

The final exam will cover material from the entire quarter, weighted towards the final part (i.e. the part not covered by the first and second midterms).

 

Is MSI offered for this course?

Yes. Details will be announced in class.

Syllabus

 

Week 1:

 

Lecture 1. Wednesday 5th January: Introduction and outline of the course. Determination and measurement of national income.

Reading:                                Mankiw Ch. 3, Appendix to Ch. 3.

                                                Nobel prize-winner Robert Lucas discusses how macroeconomics is done

Berkeley economist Bradford deLong on thinking like an economist

 

Lecture 2. Friday 7th January: Introduction to Growth. Math test

Reading:                                The reality of economic growth: History and prospect (Ch. 5 of Macroeconomics by Bradford de Long). Read p 1-42.

 

Source for data on the US:     http://www.bea.doc.gov/bea/glance.htm

Source for data on the world: http://pwt.econ.upenn.edu/

 

Section: There is no section this week

 

Week 2:

 

Lecture 3. Monday 10th January: Growth – the Solow model I.

Reading:                                 Mankiw Ch. 7, Section 7-1.

 

Lecture 4. Wednesday 12th January: Growth – the Solow model II.

Reading:                                 Mankiw Ch. 7, Section 7-2.

                                                Mankiw Ch. 8, Section 8-1.

                                               

Lecture 5. Friday 14th January: Growth, technology and institutions. Class discussion. First problem set due.

Reading:                                 The role of institutions in explaining differences in income across countries

                                                How economic incentives can encourage the development of a malaria vaccine

 

Discussion reading:               The Height Gap. Why Europeans are getting taller - and Americans aren’t

 

Section: Review of the Solow model

 

Week 3:

 

Holiday. Monday 17th January: University holiday, no class.

 

Lecture 6. Wednesday 19th January: The labor market I.

Reading:                                 Mankiw Ch. 6, Sections 6-1 and 6-2.

 

Lecture 7. Friday 21st January: The labor market II. Class discussion. Second problem set due.

Reading:                                 Mankiw Ch. 6, Sections 6-3 and 6-4.

 

Discussion reading:               Why do Americans work more than Europeans? (The travel industry’s view on why Americans should work less)

                                                Why do Americans work more than Europeans? (Nobel prize-winner Ed Prescott on why Europeans should work more)

 

Section: First problem set returned

 

Week 4:

 

Lecture 8. Monday 24th January: Consumption I

Reading:                                 Mankiw Ch. 16, Sections 16-1, 16-3, 16-4 and 16-5.

                                                Are people rational? Newsweek reports on what “neuro-economics” has to say

 

Lecture 9. Wednesday 26th January: Consumption II

Reading:                                 Mankiw Ch. 16, Sections 16-2, and 16-6.

                                                Harvard economist David Laibson on how to encourage people to save more

 

First midterm. Friday 28th January

 

Section: Second problem set returned. Review for midterm

 

Week 5:

 

Lecture 10. Monday 31st January: Investment.

Reading:                                 Mankiw Ch. 17, Section 17-1.

 

Lecture 11. Wednesday 2nd February: The stock market

Reading:                                 Class notes

 

Lecture 12. Friday 4th February: Bubbles, pyramid schemes and Ponzi games. Class discussion. Third problem set due.

Reading:                                 Class notes

                                                An IMF economist describes the effect of a huge pyramid scheme in Albania in 1996-7

 

Discussion reading:               Is there a world housing price bubble? The Economist reports

 

Section: Midterm returned. The sum of an infinite series

 

Week 6:

 

Lecture 13. Monday 7th February: Government Spending and Debt I.

Reading:                                 Mankiw Ch 3, p. 61-64

Mankiw Ch. 15

 

Lecture 14. Wednesday 9th February: Government Debt II. The Social Security debate

Reading:                                 Paul Krugman on social security reform (the liberal view)

                                                N. Gregory Mankiw on social security reform (the conservative view)

 

Lecture 15. Friday 11th February: The open economy I. The trade balance and current account deficit. Class discussion. Fourth problem set due.

Reading:                                 Mankiw Ch. 5, Sections 5-1 and 5-2.

 

Discussion reading:               Former IMF chief economist Kenneth Rogoff on the US current account deficit

 

Section: Third problem set returned

 

Week 7:

 

Lecture 16. Monday 14th February: The open economy II. Exchange rates.

Reading:                                 Mankiw Ch. 5, Section 5-3

                                                “Burgernomics” – The Economist magazine on Purchasing Power Parity

 

Lecture 17. Wednesday 16th February: Gains from trade and trade policy.

Reading:                                 Agricultural subsidies in the West and their impact on the developing world

                                                “Why Openness Helps Curb Poverty” – what the IMF says

 

Second midterm. Friday 18th February

 

Section: Fourth problem set returned. Review for second midterm

 

Week 8:

 

Holiday. Monday 21st February: University holiday, no class.

 

Lecture 18. Wednesday 23rd February: Money and Inflation I.

Reading:                                 Mankiw Ch.4.

 

Lecture 19. Friday 25th February: Economic fluctuations. Class discussion. Fifth problem set due.

Reading:                                 Mankiw Ch. 9.

                                                Mankiw Ch 19, Section 19-2.

 

Discussion reading:               The Economist magazine argues that recessions may be a good thing

 

Section: Second mid-term returned. Review of IS-LM

 

Week 9:

 

Lecture 20. Monday 28th February: Aggregate supply in the short run I.

Reading:                                 Mankiw Ch. 13, Section 13-1.

 

 

Lecture 21. Wednesday 2nd March: Aggregate supply in the short run II.

Reading:                                 Mankiw Ch. 13, Section 13-2.

 

Lecture 22. Friday 4th March: Monetary policy in a closed economy I. Class discussion. Sixth problem set due.

Reading:                                 Class notes

What is Taylor’s Rule? (an introduction)

                                                The Taylor Rule: A Guidepost for Monetary Policy? (more comprehensive)

 

Discussion reading: Are central banks watching the wrong measure of inflation? What The Economist has to say

 

Section: Fifth problem set returned. Review of prisoners’ dilemma.

 

Week 10:

 

Lecture 23. Monday 7th March: Monetary policy in a closed economy II.

Reading:                                 Mankiw Ch. 14. and Appendix to Ch. 14.

 

Lecture 24. Wednesday 9th March: Monetary policy in an open economy I.

Reading:                                 Class notes

 

Lecture 25. Friday 11th March: Monetary policy in an open economy II. Class discussion. Seventh problem set due

Reading:                                 Mankiw Ch. 12, Section 12-5.

Three IMF economists discuss the monetary regime options facing Latin America

 

Discussion reading:               Former IMF Chief Economist Kenneth Rogoff on “Why Not a Global Currency?”

 

Section: Sixth problem set returned. Review for final

 

Week 11:

 

Lecture 26. Monday 14th March: Review of the material covered over the quarter.

 

Section: No section

 

Final exam: Wednesday, March 16, 4pm-7pm

 

 

Problem Set 1. (due Friday 14th January)

Topics: Determination of National Income and Output; Growth

Mankiw Chapter 3.

Problems and Applications 3 and 6

Mankiw Chapter 7.

Problems and Applications 1, 3 and 9 (for 9, you can use the website http://devdata.worldbank.org/data-query/)

Extra question: What is your height in inches? What is average household income in your home town (Search by zip code on http://www.zip-codes.com/)

 

Problem Set 2. (due Friday 21st January)

Topics: Growth and technology; The labor market

Mankiw Chapter 8.

Problems and Applications 1 (set the population growth rate in both countries equal to zero) and 4

Mankiw Chapter 6.

Problems and Applications 1, 4, 6

 

Additional practice questions for first midterm (Friday 28th January)

You are not required to do these problems, but they are good practice for the midterm. Solutions will be handed out in section.

Topics: Consumption

Mankiw Chapter 16.

Problems and Applications 1, 3, 5, 6, 7

 

Problem Set 3. (due Friday 4th February)

Topics: Investment; The stock market

Mankiw Chapter 17.

Problems and Applications 1, 2, 5

Two further questions on the stock market TBA.

 

Problem Set 4. (due Friday 11th February)

Topics: Government spending and debt

Mankiw Chapter 15.

Problems and Applications 1, 3, 5, 6

One further question on bubbles TBA.

 

Additional practice questions for second midterm (Friday 18th February)

You are not required to do these problems, but they are good practice for the midterm. Solutions will be handed out in section.

Topics: The open economy

Mankiw Chapter 5.

Problems and Applications 1, 2, 4, 7, 8

 

Problem Set 5. (due Friday 25th February)

Topics: Money and inflation

Mankiw Chapter 4.

Problems and Applications 2, 3, 5, 6, 9 (for 9, you can use the website http://devdata.worldbank.org/data-query/)

 

Problem Set 6. (due Friday 4th March)

Topics: Economic fluctuations and Aggregate supply

Mankiw Chapter 9.

Problems and Applications 4

Mankiw Chapter 13.

Problems and Applications 1, 2, 3, 5

 

Problem Set 7. (due Friday 11th March)

Topics: Monetary policy in closed and open economies

Mankiw Chapter 14.

Problems and Applications 1, 3

Three further questions on monetary policy TBA.